Will Life Insurance Proceeds Have to Go Through Probate?

One common question people with life insurance policies have is whether or not they need to worry about proceeds from those policies passing through probate. The good news is that rarely will those payouts be subject to the probate process, so long as you have stayed up to date with your beneficiary designations. However, if you will potentially owe estate tax or you outlive your beneficiaries, then there may be some extra work required to ensure you get the most out of your life insurance policies.

Direct to beneficiaries

Proceeds from life insurance policies are exempt from the probate process so long as the beneficiaries listed in the policy are available to claim the payout. The beneficiaries will deal directly with the insurance provider to get that money.

There are some exceptions, however, to life insurance’s exemption from probate. If there aren’t any named beneficiaries or the named beneficiaries are no longer alive, the policy will probably go through probate, at which time your will or the court will determine who is the rightful recipient of the proceeds. In such a scenario, the insurance company writes a check to your estate.  Then, your estate uses the proceeds to pay your final bills and the costs and fees associated with the probate process before passing on the rest of the balance in accordance with your will, or, if there is no will, in accordance with the state’s intestacy laws.

Keep in mind that you cannot use your will to change beneficiary designations—you must communicate with the insurance provider to change your beneficiaries. But, you can change your insurance beneficiaries any time you choose.

To learn more about probate avoidance and how life insurance policies are handled in the estate administration process, contact an experienced Tampa, FL estate planning lawyer at BaumannKangas Estate Law.